Stock markets drop after US credit rating downgraded by Moody’s – business live
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How did the US lose its triple-A credit rating? Gradually, then suddenly.
Moody’s dealt the death blow on Friday afternoon, announcing it was cutting its rating on US government debt to Aa1, one notch down from the gold-standard Aaa.
This is 14 years after S&P became the first major agency to downgrade the US, with Fitch following suit in 2023.
Moody’s cited the swelling US national debt – now $36trn – and growing interest costs, saying:
Over more than a decade, US federal debt has risen sharply due to continuous fiscal deficits. During that time, federal spending has increased while tax cuts have reduced government revenues. As deficits and debt have grown, and interest rates have risen, interest payments on government debt have increased markedly.
Treasury secretary Scott Bessent tried to brush aside the issue, telling CNN that he “does not put much credence in the Moody’s” downgrade.
We've inherited a 6.7% deficit-to-GDP, the highest outside war or recession.
— Treasury Secretary Scott Bessent (@SecScottBessent) May 18, 2025
Our focus is to grow the economy faster than the debt, that’s how we will stabilize debt-to-GDP. pic.twitter.com/yblwrunO9t
Bessent took a similar line to NBC, telling their Meet the Press program:
I think that Moody’s is a lagging indicator. I think that’s what everyone thinks of credit agencies. Larry Summers and I don’t agree on everything, but he said that’s when they downgraded the U.S. in 2011. So it’s a lagging indicator.
Investors may take the same view. After all, Moody’s is only reacting to information already available to the market.
On the other hand…. US borrowing costs have been rising in recent years, adding to fiscal pressures. Moody’s downgrade could be an excuse for some bond-holders to sell, pushing down prices and raising yields (the interest rate on Treasury bonds).
The timing of Moody’s move has prompted some eyebrow-raising, at a time when some Republican rebels in Congress are opposing Donald Trump’s ‘big, beautiful bill’, fearing tax cuts will make the fiscal position even worse.
The agenda
9.30am BST: S&P Global UK Consumer Sentiment Index
10am BST: Eurozone inflation report for April (final reading)
3pm BST: Conference Board Leading Economic Index of the US economy